Constructive gadfly
Published on August 8, 2008 By stevendedalus In Politics

 

 

Big oil has stolen a page from the early ’90s pharmaceutical and AMA conglomerates that had frozen the escalating health costs while Hillary was threatening them with her universal health plan. The freeze lasted about a year until the threat subsided.

Then again, perhaps it was the other way around: that the health industry stole from OPEC and corporate affiliates’ pages of the ’70s when America went on a tear to insulate their homes, lower the thermostat, wear sweaters, scramble to purchase compact cars, install wood burning stoves and sweep up kerosene heaters by the millions. Big oil got the message and duped the US by keeping oil and gasoline prices under control for decades. It’s doing it now to counter alternative freaks but it will not last because OPEC no longer relies solely on the US market.

 

Copyright © 2008 Richard R. Kennedy All rights reserved. Revised: Aug 6,  2008.

http://stevendedalus.joeuser.com

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Comments
on Aug 08, 2008
One can see a conspiracy anywhere they want. Or one can simply understand the law of supply and demand.
on Aug 08, 2008
One can see a conspiracy anywhere they want. Or one can simply understand the law of supply and demand.


Agreed doc. And don't forget about the affect that the value of the dollar has on oil. Oil is priced in dollars and the dollar has been on the rise over the last week or so, hence oil has been on the decline. No grand conspiracy, just economics doing it's thing.
on Aug 08, 2008
Don't also forget that the stimulus checks are spent.
on Aug 08, 2008
Don't also forget that the stimulus checks are spent.


What do the stimulus checks have to do with increase in the value of the dollar? If anything the stimulus checks would have decreased the value of the dollar (the more dollars in the system, the less each one is worth).
on Aug 09, 2008
Nothing, I added as contributing to lack of demand in gasoline--seems logical to me.
on Aug 11, 2008
Don't also forget that the stimulus checks are spent.


Mine went to my broker, EF Hutton. And EF Hutton says............
on Aug 11, 2008
Richard, you're becoming something of a master of the non-sequitor.
on Aug 12, 2008
master of the non-sequitor


  
There's no one underlying cause for the slack in demand. However, overriding is money running out at these prices.
on Aug 12, 2008
However, overriding is money running out at these prices.


Hence why they call it the LAW of supply and demand, not the "Suggestion" of supply and demand. How do you think you curtail demand anyway?
on Aug 12, 2008
Listen, Doc, and you shall learn: since the '70s we have made great strides in cutting demand for gasoline by technology and alternatives. Why, even SUVs get better mileage than the gas guzzlers of yesteryear. Homes, with the massive drive to insulate, install storm windows and shutters, and newer homes built with 2x6 studs rather than 2x4s have gone a long way in controlling demand. However, admittedly, we have no way of controlling India and China's rising demands.
on Aug 12, 2008
However, admittedly, we have no way of controlling India and China's rising demands.


And demand is all demand, not just yours and mine. To decrease demand, the price has to go up. It does not matter if just you decrease it, and china increases theirs. Oil is oil. Like OPEC, if you cut back, but your neighbor does not (he cheats) the price is not going to go down.
on Aug 12, 2008
we have made great strides in cutting demand for gasoline by technology and alternatives...However, admittedly, we have no way of controlling India and China's rising demands.


And that says it all really. As Doc said, it's simple supply and demand. When world demand exceeds world supply, expect the price of oil to shoot up until the two are equal. So for example if a big oil refinery/plant is out of action for a couple of months, or a pipeline is damaged, expect a temporary spike in prices. If the demand for oil from developing countries rises as they develop, also expect prices to rise. However talks of a conspiracy where oil companies decided to keep prices high or low or stable because of the fear of people "wearing a jumper" (or "wear a second jumper", as one UK energy executive put it recently ) is unrealistic at best. If the price of oil was set below the equilibrium price at that time, you would have an increase in the amount of oil demanded, but a decrease in the amount supplied (e.g. you wouldn't have oil companies drilling etc. in areas where they expected to make only just enough of a gain at the higher prices if prices were to fall, since then it wouldn't be worthwhile), resulting in excess demand, meaning prices would then need to rise to curtail that demand, and so you're back to the equilibrium price again.
on Aug 13, 2008
Domestic oil drilling coincided with the Model T. Because demand was so high and the oil supply made money by drilling 24/7 yet kept prices stable[low]because volume more than made up for the low price. The same held true for home heating oil[8-9 cents] after WWII when new homes were turned out like iphones. However, the old volume principle doesn't work that way anymore because as global demand rises oil reserves shrink.
on Aug 13, 2008
However, the old volume principle doesn't work that way anymore because as global demand rises oil reserves shrink.


You have part of it. Reserves are actually not shrinking due to technology advances, but iit is not keeping pace with demand either. back in the 30s and 40s, most of the world was still using wood for fire, and the internal combustion engine was a luxury in 99% of it. Now, India is making cars for the masses. And they all run on oil.

As long as supply does not keep up with demand, prices are going to go up.